Last year, the US Internal Revenue Service (IRS) released Form 15620 for taxpayers to make elections under section 83(b) of the Internal Revenue Code, an important part of US tax planning for founders, employees, board members, recipients of carried interest, and other service providers who receive equity that is subject to vesting in connection with their services.1 Although the IRS previously required taxpayers to submit section 83(b) elections via physical mail, the IRS now permits taxpayers to submit Form 15620 online via the IRS website. Because of the importance of making a proper and timely section 83(b) election, taxpayers should consider making any such elections online.
Overview
To be valid, section 83(b) elections must be made within 30 days of the transfer of equity to an employee or other service provider, and, generally, there are no exceptions to this timing. Previously, taxpayers had to mail a physically completed section 83(b) election (made on Form 15620 or an alternative form) and send it to the IRS office where the taxpayer mails their annual tax return.
Taxpayers typically were advised to send their section 83(b) election via certified mail, with return receipt requested, to maintain a clear record of the mailing. But now the IRS allows Form 15620 to be filed online through the IRS website.2
New! Online Filing for Section 83(b) Elections
To file online, taxpayers must create an IRS online account, fill out IRS Form 15620 on the IRS website, and either submit the completed form electronically or download it and file it by mail. The IRS instructs taxpayers that online submission is the preferred method, but taxpayers should only file using one method to avoid delays. The online form requires taxpayers to confirm that a section 83(b) election has not previously been mailed for the equity subject to the election.
Taxpayers may continue, however, to file section 83(b) elections by mail (including via alternative forms prepared by tax professionals), but the availability of online filing for Form 15620 is intended to streamline the filing process. Once online submission is complete, taxpayers can download a copy of Form 15620, which must be provided to the employer or issuer of the equity.
Action Items for Employers and Employees
- For Employers: When notifying founders, employees, board members, and other service providers (e.g., advisors, independent contractors, and consultants) who receive equity that is subject to vesting of the section 83(b) election and its potential benefits and risks, employers should also note the availability of online filing for Form 15620. Regardless of submission method, employers should track the 30-day deadline to file the section 83(b) election; confirm whether filings have been made; and keep (for their records) proof of timely filing with the IRS.
- For Employees and Other Individual Service Providers: If making a section 83(b) election, consider filing IRS Form 15620 online for a streamlined process. Regardless of the submission method, be mindful of the 30-day filing deadline after transfer to ensure a section 83(b) election is valid. Given the complexities of a section 83(b) election and its potential tax consequences, individual taxpayers are strongly encouraged to consult with their tax advisors to determine whether to file a section 83(b) election and whether the use of a form other than Form 15620 is appropriate, including in the case of partnership equity or tiered ownership structure, which may require more detailed information to be provided to the IRS than Form 15620 allows.
Takeaways
Section 83(b) elections can provide significant tax benefits for employees and other service providers who receive equity that is subject to vesting, and online filing of Form 15620 can make the process more efficient and straightforward, especially in the case of restricted shares issued by a corporation directly to the employee, founder, or other service provider. If filing a section 83(b) election is advantageous and using Form 15620 is appropriate to make the election, taxpayers should consider filing Form 15620 online to ensure that all applicable requirements of a section 83(b) election are satisfied in a timely manner.
Footnotes
1. Read Goodwin's alert "A New Form Section 83(b) Election: IRS Form 15620" for more information on the importance of section 83(b) elections, the use of IRS Form 15620, and filing via mail.
2. Taxpayers can find IRS Form 15620 for electronic submission at irs.gov/dmaf/form/f15620.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
